Read the Verod Capital Profile here

AVCA Member Profile:
Verod Capital
Verod Capital is a generalist private equity firm based in
Lagos, Nigeria which invests in Nigerian companies with the
objective of expanding many of them into sub-Saharan Africa.
Verod Capital’s co-founder and managing director, Danladi
Verheijen, grew up in Nigeria but was educated at Stanford
University and Harvard Business School, and started his career
in the U.S. with McKinsey & Company before moving back
home to Lagos.
When Danladi returned to Nigeria in 2001, he gained operational
experience at a principal investment firm, Ocean and Oil Holdings,
followed by Citibank Nigeria, where he led corporate finance and
investment banking transactions, and also had responsibility over
Citibank’s equity investment portfolio. In early 2008, Danladi left
Citibank to set up Verod Capital with co-founder Eric Idiahi. Danladi
was named a Young Global Leader by the World Economic Forum in
2014. AVCA talks with Danladi about Verod Capital’s journey.
Q: How did Verod Capital come into being?
A: In the lead up to 2008, all of my senior colleagues
within the Corporate Finance practice at Citibank in
Nigeria had left to join other companies or start new
ones. It was an exciting time. By January 2008, I was
ready to embrace a new adventure and Verod Capital
came to life, but then markets crashed globally.
When we started Verod Capital in 2008, we had no
institutional track record, so our first eight transactions
were done on a deal-by-deal basis. It was a tough
start; we could not charge management fees, only
carry and so the pressure and alignment around
performance was significant! Fortunately, we’d also
been approached to do some advisory work, which
we took on selectively to keep the lights on; whilst,
we allowed each of our portfolio companies time to
grow! Since successfully moving into carry, we have
put a halt to our advisory work and now focus solely
on our private equity portfolio.
Q: How has the industry evolved in the time since
Verod Capital was set up?
A: When we started, the only indigenous group in Nigeria
was African Capital Alliance. By indigenous, I mean
firms with a full, permanent and exclusive presence
African Private Equity and Venture Capital Association | November 2014
Verod Capital
“There are so many
opportunities left untouched
and we just need to find
the right people to help us
execute. Like everything
worth waiting for, investing
in Africa requires patience
and fortitude, but with the
right tools and mind-set,
there is so much that can be
Danladi Verheijen
Co-Founder and Managing Director
[email protected]
on-the-ground rather than those headquartered
elsewhere but with offices on the continent. Since
2008, other groups have emerged.
Today, the likes of Carlyle have offices in across
Africa, and KKR and Blackstone are in Nigeria
frequently. This shows the genuine interest in,
and a lot more awareness of, private equity in
Africa. Business owners have also grown in their
acceptance of and appreciation for private equity
providers as their partners to help develop and
expand their businesses.
In terms of those seeking to invest in the asset
class in Africa, there is a lot more interest from
institutional investors globally, including from North
American pension funds and other institutions.
There were many institutional investors at AVCA’s
annual conference this year in Lagos, Nigeria, that
came to see things for themselves. I met two
investors from the same pension fund system
in Alaska at the AVCA conference! It certainly
feels like the beginning of a tidal shift; although it
could be 5 years or so before the levels of interest
translate into fund commitments.
The pace of change is increasing; individuals and
teams are spinning out of banks and advisory
firms, providing Nigerian, and the West African
private equity markets greater depth and breadth.
This is not surprising as there is an abundance
of opportunities at the small-to-medium end of
the market – more than enough to accommodate
the increasing amounts of capital available to be
deployed – and an increasing universe of exit routes
given the extent of activity from the mega-cap
private equity houses in the region.
Q: Verod Capital’s strategy is not atypical of
private equity firms. Can you explain how it
A: We have a very hands-on, operational approach.
First, we believe being local conveys an
advantage in market intelligence, deal sourcing
and diligence, especially in a market without
many formal sources of information and data.
With portfolio companies, aside from the
more typical role private equity firms play in
assisting to develop the company’s strategy
and monitoring the execution of that strategy
from a board perspective, we go a bit further
and, in many cases, visit companies daily, cosign cheques, oversee legal functions and even
recruit directly ourselves (we have in-house
recruitment specialists and we have hired
over 100 people directly into our companies).
We believe this approach with companies is
necessary to mitigate risk. We know Africa is
the land of opportunity – for us, a relentless
focus on execution and minimizing the
downside is therefore paramount. In Africa,
the extent of opportunity and new ideas is
obvious and easy to grasp – being successful
at consistently building strong, high growth
businesses is all about execution.
Q: As Verod Capital matures, will its strategy
A: Our core focus on building operational expertise
will not change; it’s been the hallmark of our
success to date and has provided significant
value-add to our portfolio companies. About
12 months ago, we needed to expand Verod’s
senior executive team – we were faced with
the decision of how best to complement and
build on our existing expertise. We could have
chosen a person with institutional investing
experience. Instead, we hired Mr NK Somani as
a Director and Senior Operating Partner. He has
38 years of operational experience of building
companies, predominantly in the consumer and
light industrial business segment in Nigeria. His
most recent corporate roles were at the Dangote
Group, where as CEO of Dangote Sugar, he
successfully ran the firm and took it public in
2006. He was also Group CEO of Dangote Flour,
where he successfully grew the business and
sold it to a strategic investor.
Q: Will you expand your geographic focus
beyond Nigeria?
A: Our ethos has remained the same to date: to
focus on one market, Nigeria. Nigeria has 160
million people hungry for products and services.
Nigeria’s economy equals the size of 44 other
African countries combined. I think that is large
enough for us!
Nevertheless, we encourage our portfolio
companies to move beyond Nigeria as quickly as
possible and we have helped a few of them do
that. As a general partner, we don’t think we will
have much of an advantage over the specialists
domiciled and only focussed on North Africa,
or East Africa, or South Africa, for example. So
it makes sense to focus on our strengths and
maintain our focus on Nigeria as a core hub.
Q. In 2013, Verod Capital won Private Equity
Africa’s African Large Cap Exit of the Year.
African Private Equity and Venture Capital Association | November 2014
What was special about the deal and will
we see similar deals from Verod Capital in
the future?
A: Yes, GZ Industries (GZI) is a very successful
investment which earned us the award. GZI is
an aluminium beverage can manufacturer and
began as an ‘imported start-up’. This implies
taking an existing business from developed
markets and launching it into a new emerging
market instead of simply importing the
finished product. It was not a new product in
Nigeria as cans were previously imported into
the country, however, local manufacturing
provided a cheaper source of cans for our
customers and reduced order/delivery times
from several months to less than a week,
thereby dramatically improving our customer’s
supply chain for empty cans and allowing us
to gain significant market share. Today, GZI’s
annual production capacity exceeds 1.2 billion
aluminium cans; more than double the capacity
when the initial factory came on stream. By
next year, GZI will have the ability to produce up
to 3.6 billion cans per annum in Nigeria and East
Q: As your final words, what challenges and
opportunities does investing in Nigeria
present you with?
A: I don’t see challenges - I only see opportunities.
The primary bottleneck is capacity to screen
and diligence more deals, close investments,
add value to and grow portfolio companies.
There are so many opportunities left untouched
and we just need to find the right people to
help us execute. Like everything worth waiting
for, investing in Africa requires patience and
fortitude, but with the right tools and mind-set,
there is so much that can be achieved.
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Despite GZI’s success, we will limit our
greenfield import substitution businesses
opportunities to a maximum of one third of our
portfolio. Although we don’t take demand risk
(since they are replacing imports), there is a lot
of execution risk involved and the resources
required from the general partner is significant.
We don’t have the capacity to have a portfolio
full of these. If you get it right, however, the
economics are compelling - GZI went from zero
to US$100 million run-rate in sales within 7
months. It is an incredible success story we’re
very proud of.
Q: Has AVCA been of value to you?
A: AVCA has certainly been of value. It has
helped us gain an understanding of the mindset of institutional investors. AVCA has also
provided an interesting and valuable networking
platform for us and we have learnt a lot from the
experiences of other general partners.
African Private Equity and Venture Capital Association | November 2014